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The Month Ahead…

David Santschi, CEO TrimTabs, reflects on how he sees February unfolding:

Fund flows suggest the ferocious rally off the late December lows may still have some legs. U.S. equity ETFs shed $26.1 billion in January, their biggest monthly outflow ever, which is encouraging from a contrarian perspective. Also, day traders were betting against U.S. stocks in each of the past four weeks even as prices chugged higher.

Stock buyback announcements hit a record $1.04 trillion in 2018, but they have been less than stellar so far in earnings season. They averaged $2.4 billion daily in the past four weeks, the slowest pace in the past six earnings seasons. The pace may pick up in the next two weeks. If it does not, however, it would suggest that the fourth quarter market swoon and the partial U.S. government shutdown have dented corporate confidence.

Retail investors stepped back into equities in January. They added an estimated $11.0 billion to U.S. equity mutual funds and global equity mutual funds, the biggest inflow in four years, and U.S. equity mutual funds had their first monthly inflow in four years. We will be watching to see if mom and pop investors keep buying in February.

Our key macroeconomic indicators suggest the U.S. economy has less momentum than most market participants believe. Our proprietary macroeconomic index sits at a seven-month low. Also, real growth in U.S. Treasury income and employment taxes turned more negative in January even though year-over-year comparisons became easier. We are expecting the economy to slow in the coming months.

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